Construction market outlook for 2015-2016
Construction market outlook for 2015-2016
Even a cautious count of the number of cranes across a city’s horizon is enough to tell you that construction in many UK urban areas is increasing, with clients investing in new projects and resurrecting some of those that were on-hold. With the New Year fast approaching, we thought it would be timely to look at predictions for the health of the UK and European construction sectors.
European construction outlook varies from between less than 2% to a buoyant 9% growth
According to Euroconstruct, the European market as a whole is forecast to grow at 2% per annum from 2014 to 2016, the beginning of what is expected to be a protracted recovery. Even if the projections of construction work growth are fulfilled, output and capacity utilisation in the European construction sector as a whole will remain at a relatively low-level.
The bright spots? The UK construction market is forecast to grow 3-4% per annum up to 2016, with Denmark, Hungary, and Slovakia growing at similar rates, while Poland and Ireland could grow even more rapidly (the Irish economy, of course, endured a prolonged slump, so the energetic bounce back – as much as 9% growth – reflects the previous very low levels of activity). But the outlook for France and Italy suggests their recoveries will be weak, while construction output in the Czech Republic and Spain looks set to remain below 2013 levels.
Across Europe, residential construction will drive much of the anticipated growth (average 3.2% growth, 2014-2016), with civil engineering (1.9%) and non-residential construction (1.5%) growing less quickly.
UK recovery led by housing demand and political conditions
The UK construction market recovery has been slow, and we still haven’t shaken off all the effects of the recession. Some contracts awarded during the slump were hard-won on wafer-thin margins, and as materials and labour costs have started to grow, these margins have proved unsustainable. The number of construction business closures may be diminishing but lowest price tendering continues to cause problems, as do some materials shortages – made more acute by high demand in the house-building market, which has been facing particular challenges.
The UK Government has seen house-building as a way to stimulate growth and jobs, but its policies have also created something of a ‘bubble’, with house prices rising faster than people’s ability to buy.
Domestic politics may also have delayed some clients’ investment decisions. In particular, uncertainty about potential Scottish independence led some organisations to talk about moving Scottish businesses south of the border into England while others postponed capital project decisions until after the referendum. We are also nine months from a UK general election in which all parties will be keen to show they have the right policies to maintain economic growth, including in the construction sector.
Technology and data supporting better built environment outcomes
The continued upturn in the fortunes of the UK construction market will be accompanied by other, more long-lasting changes. As a technology business, we are particularly interested in how UK clients, contractors, consultants and suppliers are adopting building information modelling (BIM).
Driven by the UK government’s 2016 BIM mandate covering centrally procured public sector projects, the BIM programme has significant momentum and should survive any change of government. The final building blocks of Level 2 BIM will be launched in 2015 when an NBS-led team releases its TSB-funded digital Plan of Works and classification ‘toolkit’, ultimately helping UK construction businesses to then sell their BIM-related knowledge, skills and experiences into new markets
As Richard Saxon pointed out in his 2013 Construction Industry Council report “Growth Through BIM”, contractors, consultants and other service providers, including software houses, with BIM expertise and capabilities will have strong export potential. In mainland Europe, for example, France and Germany are interested in the UK BIM initiative and are likely to adopt similar processes, including making BIM mandatory for public sector projects, and providing ‘common data environments’. Further afield, we know from CONJECT colleagues in south-east Asia and Australasia that industry clients, contractors and consultants see a big opportunity to apply UK BIM learning and adapt it to their regional market requirements.
To sum up, then, the international recovery, in our view, will not just be about regaining the ground lost during the recession and returning to the industry practices of the early 2000’s. Economic conditions remain tough and clients will be keener than ever to “get more for less”. In this context, there is an opportunity for technology businesses to help industry implement more collaborative BIM-based approaches to integrate supply chains, produce better designs, eliminate waste, and deliver better whole-life solutions to its clients.